As a young dentist just starting your career, you may not be thinking about financial planning. Nonetheless, financial planning can help young dentists organize their money and reach their financial goals, achieving them sooner than expected and putting them in a better position.
At Mahan Law—Dental Attorney, we represent dentists nationwide, helping them achieve their financial goals by protecting their dental practices and personal assets. We routinely work with financial experts to help dental practice owners and partners with a wide range of legal and financial matters.
The Benefits of Financial Planning Early in Your Dental Career
Financial planning benefits all professionals, not just well-established dentists with significant assets. Taking time to create a financial plan will help you narrow your financial and professional goals. After you identify your goals, you can better determine the practical steps you’ll need to take to meet those goals.
Financial planning for young dentists isn’t limited to your dental practice. It can help you determine how much you’ll need to save for a deposit on your first home, engage in effective cash flow management, and prepare for owning your dental practice if you don’t already. Whatever your financial goals are as a young dentist, organizing your finances at the beginning of your career will put you in a better position in the future.
Financial Planning Focused on Your Unique Goals as a Young Dentist
Every dentist’s career path will be unique. When engaging in financial planning, it’s essential to consider your priorities. Focusing on what you want to achieve in the future in terms of your career and personal life will help you create a flexible plan to achieve those goals.
For example, suppose you would like to buy an existing dental practice within three years of starting your career. In that case, your financial plan will look different than a dentist who wants to spend more time working for and being mentored by a more experienced dentist.
When creating a financial plan as a new dentist, it’s essential to consider your short, medium, and long-term goals. Short-term goals may include paying off a significant portion of your student loans in the next five years and saving enough money to purchase a home. Medium-term goals may include becoming a partner in a dental practice or purchasing your own dental practice. You may be focused on becoming a specialist, and your medium-term goals should reflect the need to obtain additional training and skills.
Long-term goals may include owning a practice, working part-time, traveling, and retiring relatively early. Once you’ve developed your financial plan, it’s essential to update it when you experience a significant change in your life, such as getting married, having a child, or a change in your professional life.
Financial Planning Related to Student Loan Debt
Dentists frequently graduate with a minimum of $200,000 in student loan debt. Private school students may owe over $400,000. A financial advisor can help you create a plan to tackle student loan debt. When young dentists earn a significant salary, avoiding paying low-interest student loan debt can be tempting. A financial advisor can help you determine how quickly you should work to pay off your student loan debt.
Retirement Planning for New Dentists
After completing your education and starting your new career as a dentist, retirement planning may be the last thing on your mind. While saving for retirement is an important financial goal, it isn’t the only aspect of financial planning. Although retirement may seem like a long way off, planning now can help you achieve the lifestyle you want during your retirement years. It can even help you retire early.
Whether you’re an associate dentist or you’ve owned your practice for a few years, it’s important to have tax-advantaged retirement savings accounts. Many dentists earn high salaries and end up owning their own practices. Making intentional payments into tax advantage accounts can help you lower your tax liability and reduce your student loan payments while allowing you to retire earlier.
If you are an associate dentist and receive regular W-2 income, you’ll have access to more standard retirement options than if you own your own practice. Your employer may offer you a 401(k) retirement plan that allows you to contribute up to $23,000 a year, regardless of your income level. Your employer may also offer to match your contributions up to a certain amount.
You can contribute to an individual retirement account (IRA) with an annual contribution limit of $7,000. Deductible retirement contributions into a 401(k) will reduce your adjusted gross income, which can lower income-driven student loan payments.
Retirement Planning for Self-Employed Dentists
If you own a dental practice or plan to do so soon, you have more options for retirement planning. You can choose the 401 (K) retirement plan for dental practice. For most dental practice owners, choosing a safe harbor plan is the best option as it comes with relatively limited testing and administrative expenses.
You will be required to contribute to your employees’ 401(k)s. You may also benefit from a tax credit for the administrative costs of the retirement plans. Choosing a defined benefit plan or a simplified employee pension (SEP-IRA) may also be beneficial.
Contact Our Experienced Nationwide Dental Attorney At Mahan Law
At Mahan Law, our dental attorneys understand dentists’ challenges, including young dentists beginning their careers. We can help you protect your assets while developing a financial plan for the future that will help you meet your financial goals. Creating a financial plan early in your career can significantly impact your future. Contact Mahan Law – Dental Attorney to schedule a complimentary case evaluation and learn more about our legal services.
